The rise of in-store retail & private label products

Business consulting firm EY has shared the results of its annual research project, Future Consumer Index, which surveyed over 23,000 consumers from 30 different countries, and has made a host of discoveries about consumer needs.  

One notable revelation is that despite the recent advancements in AI and the popularity of online shopping, most consumers still value in-store experiences and human expertise more. 

The survey also shared a host of other findings related to the topic of ecommerce vs brick-and-mortar shopping: 

• 57% of respondents said they wanted to be able to see and touch items before they bought them.  

• 68% said they sought out expert advice for high-value purchases. 

• 49% said they were frustrated by smart chatbots that are not effective in resolving their queries and instead indicated a preference for human interaction.  

• 61% said they would happily go to a brick-and-mortar retailer for a store promotion that is not available online. 

• 30% said that poor customer service/support and difficulty connecting with a customer service assistant was a significant issue in their digital shopping experience, while 32% said they preferred the personal service that only in-store shopping can provide.   

Mixing tech with a human touch ​

According to EY, these findings show that retailers and manufacturers need to strike a balance between leveraging technology streamlining processes and maintaining the human element to provide personal service and support. 

But EY’s global consumer leader Kristina Rogers also pointed out that technology doesn’t need to be the enemy of human interaction and can instead be a powerful ally. 

Rogers noted that brands and retailers that use tech to support a human-centered experience are more likely to succeed and suggested that a blend of tech and human skills is the ideal formula.  

“Companies must not only leverage data and analytics to gain consumer insights and anticipate future needs, but also to uncover points of friction and customer dissatisfaction that need to be addressed,” she said.  

“Striking the right balance between using technology to spot and resolve these challenges early, along with customer service training that is responsive, empathetic and creates value for the consumer, is key,” she continued.  

“AI-led product recommendations can deliver incremental sales, but they won’t resolve more complex, service-oriented customer needs. Investing in people, both in terms of experience and knowledge, is equally as important as investing in technology, and they must go hand in hand.”  

Frustrations with digital customer service ​

The report also placed a spotlight on customer service issues related to the digital shopping experience. 

For example, 26% said that getting a refund or making an exchange is a source of frustration when shopping online. While 30% said poor customer service/support and difficulty connecting with a customer service assistant also ranked highly as a source of stress when purchasing through the online channel.  

EY flagged that this highlights the “critical need” for a more integrated approach that combines advanced technology with a strong human element to address and resolve customer frustrations effectively. 

More time being spent at home ​

While consumers are returning to physical stores for high-value purchases, the report revealed that the home continues to grow in its role as the centre of consumption.  

Since the Covid pandemic, more consumers are moving away from convenience and digital streaming services and are less interested in following the latest trends. 

The research found that people said they were spending less on grocery deliveries (38%), streaming services (35%), fashion (35%), beauty (37%) and consumer electronics (41%).  

Instead, 68% said they were planning to reconsider how they spend their time on things they value the most.  

For example, 31% were planning to entertain and 47% were planning to cook more at home, compared to 29% and 39% respectively in 2023.  

According to EY, this preference for at-home experiences over convenience services is a response to sustained inflationary pressures challenging household budgets.  

The research showed that 85% of consumers are concerned about their finances and 72% planned to be more focused on value for money in the future. 

And this wasn’t just older generations. Over two-fifths (43%) of younger generations (Gen Z and Millennials) were also embracing this shift.  

Over half (54%) of younger consumers planned to cook more at home, while 37% planned to entertain more at home.  

Rogers said: “In response to this emerging trend, consumer companies must reevaluate their strategies for engaging with consumers, particularly the younger demographic.  

“As consumers are less willing to pay for digital conveniences, businesses will need to recalibrate the role that digital channels play in driving revenue and profit margins and prioritise physical distribution outlets.” 

Shoppers favouring private-label products ​

The research findings also highlighted that 55% of people quizzed were concerned about the rising cost of living, which has in turn driven 72% of them to be more focused on value for money in 2024.   

Leading on from this, the ever-rising popularity of dupes​ was touched upon. 

Nearly a third of consumers (28%) said they now bought private label goods over branded ones in response to rising costs, and 66% said that they found private label products just as good as branded alternatives. While 38% of these even said that they would not switch back to branded goods. 

The research also revealed that this trend is not exclusive to people in the mid- to lower-income bands.  

Higher income consumers were planning to buy private label brands in the future and are considering this across every category, including fresh food (60%); home and household care (56%); packaged food (52%); clothing, shoes and accessories (49%); personal care (49%); and beauty and cosmetics (39%).  

Retailers “capitalising” on the private label opportunity  ​

The research revealed that retailers are trying hard to capitalise on the opportunity by promoting private label aggressively – with eye-level shelving and front-of-store placements – as well as increasing the range of products they offer.  

Instead of just emulating branded products at a lower price, they are offering a range of product options and analysing their point-of-sale data to identify early trends. This puts them in a strong position to respond to buying patterns and consumer needs.  

According to EY, the closer retailers get to the consumer, the more power they have to curate buying choices and the more they can drive lasting loyalty.  

Rogers explains more on what’s currently happening: “In response to the growing popularity of private label with consumers, many consumer products companies are focusing on volume recovery. Efforts to simplify the portfolio, drive down costs and unlock resources are important, but this must happen alongside innovation and marketing – they need to keep their brands inside the consumer’s circle of trust to maintain their margins and fund growth agendas.  

As a concluding comment on the report’s findings, Rogers shared her advice for both retailers and manufacturers.  

“For retailers, better data analytics capabilities will help them target and reach consumers. They can use retail media and loyalty programs to incentivise private label purchases and create alternative revenue streams by promoting their partner brands,” she said.  

“Consumer products companies will need to take a balanced approach – promoting their brands to meet today’s goals, while also pursuing ways to keep these new consumers and earn their loyalty. Innovative new products that differentiate from private label and which consumers find valuable will be key to their future success.”